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Sunday, October 23, 2005

Critical illness cover

Critical illness cover is one the most important elements of personal insurance. Sometime, it is even more important than the death coverage. For instance, even if you don't have dependent, it is still important to have coverage on permanent disablement and critical illness. Of course, it would be good to have a small amount of death coverage that can cover your funeral expenses.

Life insurance companies understand this, therefore life insurance is designed in a way that we CANNOT buy critical illness separately from death and permanent disablement coverage. We are FORCE to buy death coverage, even if we want to buy critical illness coverage only.

In Malaysia, there is one insurance company offers critical illness cover without attaching it to life insurance: American Home Assurance. It is a general insurance company.

The plan is worthwhile if you are below 46 years old. For instance, the annual premium for a 25-year-old is RM84 only. By splitting out the critical illness coverage from your life insurance, you can get a term life insurance with reducing coverage. It can cut your entire insurance premium further by half.

Thanks Azhar, I have just followed the takaful link you gave and looked at the web site. I think the availability of affordable medical insurance package, which do not attach to life insurance, is really important for us as consumers. It gives us a choice to buy what we need and a choice not to buy what we don't need.

Hi Chen Tong, I am impressed by the effort you put into this website. Anyway, just to share, AVIVA (General Ins) has a product that only covers critical illnesses, there is even an option to cover 20 common ones or all the 36 of them.

With RM360/yearly (from age 18-65), u can get RM 100K coverage on life/critical illness and additional RM 100K for P.A. One can insure up to RM 500K (RM1800/ yearly).

Try to ask your insurance agent if you want to buy RM500K coverage on life/critical illness, he/she will very happy to see you even in the midnight (2, 3 am). The premium you pay will simply too attractive for him.

One disadvantages of this plan is it is yearly renewal basis. If the underwriter found they couldn’t make money on the plan, they may either increase the premium or discontinue it. Here, your AHA's products are better. (Is it 30 years term?)

Hi hanson, thanks for the kind words. I am guilty of not watching the comments section daily. :-)

Hi RG2005, you can call AHA to find out more...the number is in this post. :-)

As you rightly pointed out one of the problem for yearly renewal insurance is that the company will adjust the premium or stop the plan if the plan is not profitable.

However, given the development of insurance industry in Malaysia, there will be more options in the future.

There ideas promoted here is "not to buy what we don't need". Then we can cut down our premium. For instance, in a specific situation that we don't need death coverage, even if the premium for "critical illness only" plan increases, it is still cheaper than the premium that we pay for life insurance+critical illness plan.

Insurance companies like to sell us package plan, bundling what we need with what we don't need.

A wise consumer will want to dissect the package into it individual plan and buy only what we need. :-)

I don't have an outright answer, but this is my non-professional opinion for myself...

There are two issues here:1) I believe medical coverage that we should get is to sufficiently cover our medical expenses. This is regardless of one's networth or future living expenses. There is medical insurance offered by MNI oneline. Off hand I don't have the numbers. But it covers over few hundred thousands in a very affordable price. But there is a minimum medical expenses to be paid by the buyer.

2) Loss of income is to be covered under critical illness insurance. The amount required is very subjective. 5 years of minimum living expenses? 10 years of minimum living expenses? I will listen to my insurance agents and my own affordability to make my own judgement.

In a case of critical illness, I think it is hard to get back to the original standard of livings no matter how much we pay for the critical illness insurance.

Just remember I am not in the profession of insurance. It is best to talk to some agents that you can trust.

life insurance malaysiais regarded as temporary insurance (as opposed to permanent insurance like whole life), and as such, it does not provide any surrender values, paid-up values, loan values or any of the non-forfeiture privileges.